Twelve months ago, persistent campaigning by the UK haulage industry for charges to be imposed upon foreign hauliers using Britain’s roads looked set to pay off. The Coalition’s 2010 Programme for Government committed the Government to work towards a new system of lorry road user charging (LRUC) to ‘ensure a fairer arrangement for UK hauliers’. Transport Secretary Philip Hammond went further, telling the Transport Select Committee that the aim was to introduce LRUC by April 2014.
UK hauliers might seem unlikely lobbyists for the introduction of a new HGV levy. However, whilst LRUC is used throughout Europe to ensure HGV operators pay for infrastructure damaged by their vehicles, supporters (including the Freight Transport Association and the Road Haulage Association) believe charging is required in the UK to deliver ‘a level playing field’ between UK and overseas hauliers.
UK fuel and vehicle excise duties are considered to place British lorry drivers at a competitive disadvantage to their European counterparts. They enjoy cheaper fuel and lower taxes. Further, many European countries impose blanket road tolls or levies ensuring maintenance costs are shared by all road users, irrespective of their origin.
The DfT’s recent Survey of Foreign Road Goods Vehicles supports the view that HGVs from overseas use UK roads without proportionately contributing to their upkeep. During 2009, foreign vehicles clocked up 948 million kilometres on UK roads. The average trip for such vehicles involves a distance of 649 kilometres yet, through use of ‘belly tanks’ to store cheap continental fuel, only purchases of 10 litres of UK diesel.
LRUC can address this anomaly by imposing a levy on all hauliers operating on UK roads whilst offering UK drivers an appropriate rebate of UK fuel or vehicle excise duties, delivering a revenue neutral result. Such a scheme reflects the Coalition’s stated objectives for LRUC. Hauliers welcomed the proposals to develop a LRUC regime, being led by Mike Penning MP, Parliamentary Under Secretary of State for Transport.
Of course, UK hauliers have been here before. The Labour Government introduced preliminary legislation for LRUC in 2002. At that time, a distancebased charging scheme was favoured. The scheme was expected to raise £319 million annually, with a rebate being offered to UK operators. However, concerns grew over the set up and operating costs involved. Ultimately, the Transport Select Committee, in studying the LRUC proposal, concluded that ‘the sums may not stack up. The government should be wary of committing itself to implementation of a potentially very expensive and overly-sophisticated system’. Much to the anger and frustration of UK hauliers, LRUC was ultimately scrapped.
Whilst the Coalition’s promise to return to the agenda of ‘fairer arrangements for UK hauliers’ was welcomed, concerns are growing that the devil may, once again, appear in the detail.
Any UK LRUC scheme must comply with the European Eurovignette Directive which lays down rules for EU member states who introduce motorway tolls or charges. User charges should be scaled according to the duration of the use made of the infrastructure and to vehicle emission classes. The Directive also fixed a maximum daily user charge of €11 for all vehicles categories. To add further complexity, the European Parliament has just agreed to extend the scope of the Directive to allow charging to reflect a portion of the external noise and pollution costs generated by HGVs and for infrastructure costs to be varied by up to 175% to take account of congestion.
It is rumoured that the UK’s proposals will involve a charge of around £9 per day with foreign vehicles paying by means of a vignette system, reflecting schemes already operated by other European countries. But it is not yet clear how British vehicles would be charged, what form the rate rebate might take or whether the funds raised would be sufficient to meet the costs of implementing and administering the scheme.
The Government has promised that getting the rebate right is a top priority. But this could prove complex and expensive, particularly if it is necessary to look at fuel duty, as in 2003. Identifying a viable structure for LRUC, which stacks up in monetary terms, delivers a tax neutral result for UK hauliers and complies with changing EU rules remains the challenge.